I purchased vacant land to build a primary home on. Mortgage interest is deductible once construction starts, for 24 months. Is construction defined anywhere?

mattpparker · ‎June 6, 2019

We immediately started "work" of clearing the land to make it suitable to build on, but didn't pull the building permit and start on the house itself for another 7 months. It'll still be done within the 24 months. Can I count the interest paid before acquiring the building permit?

MichaelDC · ‎June 6, 2019

Yes. Acquiring a permit is not a requirement to claim the mortgage interest on Schedule A. Clearing the land would qualify as construction cost.

A little more info:

A manufactured home qualifies under this rule: Interest on land can be deductible if you intend to build a house on it. You can claim a mortgage interest deduction if you will be completing and moving into the home within 24 months of when you start claiming the write-off. The deduction covers your loan on your lot as well as your construction loan if any. To be able to claim this write-off, the house under construction must be your first or second house, and your total mortgage debt must be $1.1 million or less.

Please feel free to post any additional details or questions in the comment section.

https://www.nolo.com/legal-encyclopedia/deducting-interest-when-constructing-new-building.html

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mattpparker · ‎June 6, 2019

Thanks for the feedback.

This one is standard construction, and it'll be our primary home when it's done.  We only have 1 other place to live at the moment, that we currently call our primary home; it will be gone when the new house is complete.  So, for 2017, it'll count as our 2nd home.

We paid interest on a mortgage for the land only for a while, with the land as collateral.  We paid it off and got a construction loan, with the land and house as collateral.  If I understand correctly, the interest on both mortgages is deductible.

MichaelDC · ‎June 6, 2019

That's correct and good handling in your comment. Good luck on your taxes and new home!

I purchased vacant land to build a primary home on. Mortgage interest is deductible once construction starts, for 24 months. Is construction defined anywhere?

Deductions & credits

Deductions & credits

Deductions & credits